Failure to comply with tax audit to result in hefty fines, tax experts warn
Organisations across the UAE which fail to comply with the rules in place regarding the tax audits conducted by the Federal Tax Authority (FTA) will be liable to pay hefty fines, experts warned at a webinar on Wednesday.
Presented by Khaleej Times & MBG Corporate Services, the event sought to bring clarity to some of the key issues regarding tax audits, and brought together key experts in the field to share their insights.
Vipin Ahuja, director – Tax, MBG Corporate Services, started the event with a presentation on why the Federal Tax Authority is conducting tax audits. He explained that the provisions of the federal law on taxation have mandated the FTA with the legal right to perform a tax audit on any person to determine their compliance with the provisions of the relevant laws. FTA authorities will check the returns and other documents like sales invoices, purchase invoices, Customs & VAT documents related to the import and export of goods and services. The FTA can conduct these for any reason, or whenever they want, as per a set of criteria. It is advisable for all business entities in the UAE to prepare themselves for these tax audits in a timely manner as the FTA allows only five days for responding to their queries.
Under the Self-Assessment System of VAT returns filing, the onus is clearly placed on taxpayers and businesses have to interpret and apply the tax legislation correctly to comply with their respective tax obligations, he explained.
Ahuja also shared probable factors for tax audit selection. “The first has to do with if your company is in a VAT refundable position. Ever audit starts with your risk profile and how your company holds up against the FTA risk profile parameters. If you are in this position, then you will definitely be on the FTA’s radar. Another factor is if you are a large-scale business with high volumes.”
Other reasons include a history of late Return submissions, the occurrence of incorrect filings, a non-reconciliation with Customs Records, delay of payment of Taxes/Penalities, and negative adjustments to imports
Laila Aziki, tax agent, MBG Corporate Services, then revealed that there are several penalties for non-compliance with tax audits. One of the heftiest is a Dh20,000 fine that will be charged for failure to facilitate the work of the tax auditor.
“The submission of an incorrect tax return will result in a penalty of Dh3,000 for the first time, and Dh5,000 for repetition and five per cent, 30 per cent, and 50 per cent based on the time of correction,” she said. “Non-maintenance of any financial records will result in a Dh10,000 penalty; and failure to settle the amount payable as sated in the return will result in a one per cent daily penalty up to 300 per cent when unpaid for one calendar month. This is increased to four per cent due on the seventh day and two per cent due tax immediately.”
Ahuja noted that companies can start their journey towards VAT compliance by ensuring accurate and complete data capture into the system; reconciliation of VAT Returns with Books of Accounts & Custom Records; and the maintenance of all the relevant supporting documents.
Dubai Economy and Amazon join hands to support start-ups in digital economy
Amazon will curate a dedicated storefront on Amazon.ae to showcase products available from DED Trader license holders
The Business Registration and Licensing (BRL) sector in Dubai Economy and Amazon have launched a new programme to support DED Trader license holders by providing interactive e-Learning content to help them thrive in the digital economy.
The new programme is part of the cooperation between Dubai Economy and Amazon to support DED Trader license holders interested in making their products available to more customers and growing their businesses online. The programme will offer access to the Amazon Seller University, which provides a series of training videos and resources that will help participant’s master key tools and applications to build their brand and expand their businesses to reach millions of customers.
“Dubai Economy strives to deliver solutions that contribute to enhance the ease of doing business in Dubai and expanding growth, in addition to maintaining a sustainable economy that reflects the emirate’s position as a global economic destination,” said Omar Al Mehairi, director of Development and Follow-up Division in BRL sector.
“The continuous partnerships between the governmental and private sector will raise the level of efficiency and provide a seamless service environment for the business community as per highest international standards. Dubai Economy aims to accelerate the implementation and growth of e-commerce initiatives and promote innovation and technology integration within the local business community,” added Al Mehairi.
Ronaldo Mouchawar, VP of Amazon Middle East and North Africa (Mena), said: “At Amazon, supporting SMEs is a fundamental part of our work and an extension of our customer-centric culture. Third-party sellers, most of which are SMEs, account for more than half of everything sold across Amazon stores globally. We have faith in the potential and capabilities of start-ups in Dubai, and through such collaborations, we aspire to accelerate their entrepreneurial journey with all the tools and retail expertise we have to offer.”
Amazon will curate a dedicated storefront on Amazon.ae to showcase products available from DED Trader license holders. Once the businesses are registered to sell on Amazon.ae, they will have the opportunity to access Amazon Account Managers who will work closely with them to offer strategic advice and insights to help them sustain and grow their business.
The Account Managers will also support the start-ups with advice on operational aspects such as listing creations and how to gain visibility on their products. They will offer advice on key areas such as fulfilment and inventory, merchandising and advertising, and ensure start-ups are up to date on the latest programmes that will help fast-track their growth on Amazon.ae.
Amazon.ae has progressively launched tools to help local businesses, including the Amazon Seller Mobile App, which allows selling partners to conduct business with more speed, ease, and flexibility.
DED Trader is issued by Dubai Economy to license freelancers in their place of residence in Dubai as well as business activities that operate online or on social networking sites. DED Trader, which is issued electronically through invest.dubai.ae, aims to guide traders towards the right path to start and enter the business world.
Oman to levy 5% VAT from next month
It is estimated that VAT will raise around 400 million Omani riyals per year.
Oman will start implementing five per cent value-added tax (VAT) from April 16, Oman News Agency reported on Sunday
It is estimated that VAT will contribute 1.5 per cent towards the country’s gross domestic product (GDP) and raise around 400 million Omani riyals (Dh3.8 billion; $1 billion) per year for the country’s exchequer.
The implementation of VAT comes in line with the GCC framework that was agreed between the six nation bloc. The UAE and Saudi Arabia levied five per cent VAT on January 1, 2018 followed by Bahrain. Saudi Arabia later hiked VAT to 15 per cent amidst shortfall in revenues due to plunge in oil prices.
A study by EY had predicted that the adoption of VAT by GCC countries would generate additional annual revenues of $25 billion.
Saud bin Nasser bin Rashid Al Shukaili, chairman of the Tax Authority in Oman, said all necessary preparations and requirements to implement VAT from April 16 have been completed.
Oman’s tax authority had opened registration process for the companies to register in the special tax system in February last year.
He explained that companies have been given the necessary time to prepare their accounting systems and other measures for tax compliance.
UAE businesses that must register in anti-money laundering systems
The Ministry of Economy (MoE) has listed the businesses that need to register in the anti-money laundering systems before March 31.
These include real estate agents, gold dealers, auditors, and service providers for companies.
Referred to as designated non-financial businesses and professions (DNFBPs), they have been asked to register in the Financial Intelligence Unit (goAML) and the Committee for Commodities Subject to Import and Export Control system (Automatic Reporting System for Sanctions Lists).
Such businesses were given an extended grace period till March 31 to register, in order to avoid penalties, which include licence cancellation and closure.
It is among the several measures adopted by the government to combat money laundering and financing of terrorism in the UAE.
The MoE also underlined the importance of adopting measures to counter money laundering. Failure to do so result in fines ranging from Dh50,000 to Dh1 million – which can be doubled to as much as Dh5 million.
The ministry explained that a wide range of non-financial business and activities are “most exposed to money laundering risks”. These have been divided into four main categories.
>> Brokers and real estate agents: When entering into operations in the interest of their clients for purchase and sale of real estate.
>> Dealers of precious metals and gemstones: When they perform any single-cash transaction or several seemingly related transactions with a value of Dh55,000 or more.
>> Independent auditors and accountants: When they prepare, conduct or implement financial operations for the benefit of their clients, related to the following activities:
– Buying and selling real estate.
– Managing money that the client owns.
– Managing financial, savings or stock accounts.
– Contributing to establishing, operating or managing companies.
– Establishing, operating or managing companies, or legal arrangements.
– Buying and selling commercial entities.
>> Corporate service providers and trust funds: When they undertake or execute an operation for the benefit of their clients or on their behalf in relation to the following activities:
– Work as an agent in establishing companies.
– Working or preparing someone else to work as a director or company secretary, or as a partner in the company.
– Providing a registered office, business address, place of residence, address for correspondence, administrative address of a legal person, or legal arrangement.
– Act as trustee for a direct trust fund or to perform a similar function for another form of legal arrangement.
– Working or preparing another person to act as a shareholder for another person.